Indians have applied to petrol stations, jewellers, fruit shops and any other store that is still accepting 2,000 rupee notes worth about $24 each that will soon be debited.
India’s biggest banknote spending race has continued since India’s central bank announced earlier this month that it would be out of circulation by early fall.
India’s sprawling economy remains heavily cash-dependent, and many businesses welcome the surge in traffic, even if they’re short on change. Economists say repeal of the high bill could help fight corruption, bring workers into the formal economy, improve tax collection and accelerate India’s push for digital payments.
But for some consumers, the move erased unpleasant memories of 2016 when Prime Minister Narendra Modi’s sudden ban on high denomination notes left him without enough cash for basic transactions. . In an economy driven by rural informal workers, some do not have bank accounts or trust government economic policies.
“It’s better to buy gold and silver and store them,” said Meenu Kebat, 32, a janitor in New Delhi. She has no bank account and keeps her cash earnings in a tin box. Since the recent ban was announced, she said it took her four days to trick shopkeepers into converting 12 2,000 rupee notes into smaller bills.
“Cash can’t be trusted now when the government can do whatever it wants,” said Kebat, standing outside a grocery store in southern Delhi. “You can always cancel a note, big or small.”
fine print
In 2016, Modi’s government withdrew India’s two largest banknotes at the time, the 500 and 1,000 rupee banknotes, in order to expose and punish those who held unexplained large sums of gold. Announced without notice.
After this sudden withdrawal of monetization, some retail businesses came to a standstill as ATMs became overcrowded and customers hoarded what little cash they had. As the collected banknotes accounted for about 86% of the cash in circulation at the time, the government decided to introduce 2,000 rupee banknotes as a “re-monetization” measure to mitigate the currency crisis.
So far, the move to remove the 2,000 rupee note from circulation has not caused much disruption. It may be because it makes up less than 11 percent of the currency in circulation. India’s 1.4 billion people will also have until September 30 to use their banknotes or exchange them at banks. (Notes have remained legal tender since then, but many Indians are taking the deadline seriously, fearing government policy could change.)
In the long term, the removal of the 2,000 rupee note will probably help a gradual positive move towards formalization and transparency, said economist Phyllis Papadavid, who studied the 2016 non-monetization program. . For example, more workers will need to be formally registered and able to claim benefits, further increasing the barriers to tax evasion.
“I can’t think of any aspect of digitization and formalization that would make the economy worse, basically because it would lead to better access and management of information and accountability,” said Ms Papadavid, Head of Research and Advisory. rice field. Asia House is a research institute in London.
But in the short term, the money rush is causing some headaches.
changed in a short time
Indian news outlets have reported a surge in foot traffic across the country in recent days to businesses accepting 2,000 rupee banknotes.
“People have a habit of keeping either high denomination cash or gold at home,” said jeweler Vicky Bansal, who said his shop in New Delhi has been particularly busy since the announcement. rice field. “So if you can’t store 2,000 rupee notes, you’re going to store jewelry.”
Ajay Bansal, president of the All India Petroleum Dealers Association, said in a statement that nearly 90% of purchases were made in 2,000 rupee notes at petrol stations across India since the announcement, up from the usual 10%. rice field. “There is an extreme shortage of change in outlets across the country,” he added, as many customers would use the bills to buy just 100 or 200 rupees worth of gasoline.
At a fruit shop in south Delhi, owner Rizwan Ahmad said he stopped accepting 2,000 rupee notes for the same reason.
“It took me three days to pay back the change I borrowed from tea vendors, barbers and pharmacists,” said Ahmad, 33, outside a fruit stand in a crowded bazaar. Now he has his 2,000 rupee note worth about $400 and has to withdraw by the September deadline.
broken trust
The Modi government has made that distinction clear. Withdrawal of 2,000 rupee banknotes As a logical step in economic policy. Reserve Bank of India Governor Shaktikanta Das said the banknotes “had little impact on economic activity as they were hardly used.” told reporters last week.
However, some critics called the policy shoddysaid it had shaken consumer confidence and undermined the rupee’s health. Others say that while the 2016 campaign allowed the government to recover nearly all of the withdrawn banknotes, it did not eliminate unspent cash, known as black money, from the economy.
The policy has also been criticized by people in other South Asian countries whose businesses accept Indian rupees. In Bhutan, for example, the 2,000 rupee note is currently “almost worthless” because it cannot be exchanged, says Tenzin Ramsan, a prominent newspaper editor in the country. I posted on Twitter last week.
He added that India is in talks to make the rupee a global reserve currency. “But if your neighborhood doesn’t trust your currency or your irregular decurrency, do your best to get the world to accept it,” he wrote.
Shankel Sharma, a petrol station owner in New Delhi recently expressed a similar sentiment. “People no longer trust the government with cash,” he said.
To deal with the influx of 2,000 rupee notes, he put up signs warning customers not to fill their tanks with gasoline worth 50 rupees (about 60 cents) and expect change. Either way, if anyone does, “I’ll have to get rid of them,” he said.
